Damages are a key concern in international arbitration proceedings because achieving them or avoiding them are the countervailing goals of the parties. Damages may take many forms: they are not only compensatory, but they may also be subject to counterclaims and set-offs, reduced by failures to mitigate and enlarged by the application of interest and costs. They may be arrived by tribunals in a variety of ways, some more disciplined than others. Issues of causation loom large even before the application of methods of quantification.
Ascertaining damages can therefore be a hugely complex process, both legally and factually, for those presenting or defending against them and for those assessing them. In measuring damages, tribunals may be required to address such factors as destruction of market value, lost dividends or royalties and similar future consequences of what may be found to be the unlawful deprivation of business property. In cases concerning capital investments, tribunals may have to look decades into the future and consider uncertainty of future revenues or costs, interest rates, inflation, regulatory changes and other risks. Complex calculations are usually required and expert evidence is invariably involved. In addition, since claims are often for hundreds of millions of dollars or more, even small changes in the variables used in valuation methodology may significantly affect the amount of the award.